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Today joining John on the pod will be Lucas Loptain. Lucas has created several companies and currently has a startup studio dedicated to creating anti-unicorns, mainly targeting SAAS companies, which are all tech-enabled. They'll be diving into what his company investments look like, the scale and pace at which they go through this process, and how they help companies understand how far they can go. He’ll also break down the format of deciding which founders to work with from their hundreds of monthly applicants. These anti-unicorns are en route to success and you’ll learn how Lucas put them on this path.
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John Wilson: @WilsonCompanies on Twitter
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Announcer: Today, joining John on the pod will be Lucas Lopatin. Lucas has created several companies and currently has a startup studio dedicated to creating anti unicorns. Mainly targeting SaaS companies, which are all tech enabled. They'll be diving into what his company investments look like, the scaling and pace at which they go through this process, and how they help companies understand how far they can go.
Announcer: He'll also break down the format of deciding which founders to work with from their hundreds of monthly applicants. These anti unicorns are in route to success, and you'll get to learn how Lucas put them on this path. Enjoy.
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John Wilson: The US based team has taken care of small business bookkeeping and taxes since 2005. Find them online at AppletreeBusiness. com or email Patrick at AppletreeBusiness. com. Welcome back to Owned and Operated. Today I have Lucas Lipatin on. Welcome Lucas. Thanks for having
Luke Lopatin: me, John.
John Wilson: Yeah, it's gonna be a lot of fun.
John Wilson: Our pre episode prep was already a good time, so I know the episode's gonna be fun, too. How about you give us, like, a little bit of a primer on what you're up to now and what you've been up to over the past couple of years? Catch us up to speed.
Luke Lopatin: Absolutely. So, a little bit of background on myself. I've been married with my wife for 17 years.
Luke Lopatin: We have three daughters. We are both originally from Argentina. Trying to be global citizens at this stage. I've always been an entrepreneur, started my first company when I was 16 with my dad, I was never lucky enough to actually have a boss, which at some point I wish I had to not make all the expensive mistakes I've made.
Luke Lopatin: I created several companies, some of which ended up doing fairly well. I built a tech consultancy. Called United virtualities, which goes by UV. And last year it was acquired by a private equity group called Argonaut out of Texas. And after that, it took a few months off and they started what's now called IndieBuild.
Luke Lopatin: So Indie, it's a startup studio. To create anti unicorns. So our main thesis is we much rather have, you know, like be creating companies to have 70, 80 percent chance of succeeding. Even if it's a 10 million, 20 million, 30 million payout. Instead of just going for that one, two, three or decade corn status.
Luke Lopatin: So we prefer the sure and steady more than the glory of just being a huge unicorn.
John Wilson: I am super into that mission. Is it all still tech based?
Luke Lopatin: It's
John Wilson: all tech
Luke Lopatin: enabled. So we have several business models that we do. We mainly go after SAS companies. That's one of our main thesis is because it allows to grow skill fast and all the good stuff about SAS.
Luke Lopatin: But we're also doing productized services. So we have just launched literally yesterday, a accounting as a service. So in Latin America, there are amazing accountants that currently work for outsourced to big BPO outsourcing firms, working for big global clients. And to be honest, those accountants don't get paid much.
Luke Lopatin: So what we want to do is bridge that and bring them together with smaller dedicated clients that can actually pay them what they're worth. So that's a product I service. We also have a DTC brand. That's targeting beauty in Mexico. And we also have a content site like UNITA, which is a directory of communities.
John Wilson: That is fascinating. Is it three portfolio companies now or did I miss one?
Luke Lopatin: No. So basically at this stage, I'm going to go through them. So we started operations in August of last year, 2021. We're in the process of our sixth company right now. So the first one is called Junker, which is the DTC brand.
Luke Lopatin: Beauty in Mexico. The second one is called UNITA, which is the Directory of Communities. The third one is fascinating, which is called Recruiter AI. So it uses GPT 3 to create hyper personalized messages that recruiters use. In LinkedIn to reach out to each person. So before they usually take, you know, a minute or two minutes to go over the person's profile, they see what they like.
Luke Lopatin: They try to customize their message. What we do is we take GPT 3 and a little bit more of our, you know, AI tricks behind this, behind our sleeves. And we make that automated. We also have what's called CPA assistance, which is the accounting as a service. We are right now in the process of vetting out a phishing as a service, mainly for fintech companies in Latin America.
Luke Lopatin: So it's using both people and technology to automate what's called ethical phishing, which is basically trying to catch employees of your company, click on emails that they should have not clicked on, input their user and password into pages that they should have not. And then we have the last one, which is a little bit secret now.
Luke Lopatin: So hopefully in two weeks, it's going to see the daylight.
John Wilson: Okay. Yeah. I mean, this is awesome. I totally love this so far. Are these startups or are you acquiring an active platform and growing it?
Luke Lopatin: So the thesis behind Indie, I'm going to take a little bit of step back. It's, it comes from multiple places. So Indie for us is our version of what a startup studio should be for the Indie hackers.
Luke Lopatin: Particularly. around the indie hackers in Latin America. All four founders are based in Latin America in different countries, and most of our companies are targeting the US. So what we're doing is first just trying to emerge and make the system, the ecosystem of entrepreneurship in Latin America as large as we can.
Luke Lopatin: So that's kind of like my personal mission behind this. And that's what also create a lot of content and just do a lot of effort. Just to bring on all this knowledge. That's amazing in English, but it's not out there as much in Spanish. Anyone listening, excuse my English. It's not my first language. I do a best effort.
John Wilson: You're doing great.
Luke Lopatin: And the other portion of it that's really interesting is that for the investment that we do, which is 50, 000 per startup, the founders of each company can live off that for over two years and they can use to pay any other expenses until they get profitable enough, or at least until they get some revenue.
Luke Lopatin: And then we can use the non dilution financing like pipe. com or any sort of non dilution financing options out there, particularly around for SAS companies. So our thesis is with the investment that we give them, they'll probably not need to raise any more money in the future. Aside from what they will be charging their clients and doing, you know, you know, lifetime deals and all of the typical stuff that can be done.
Luke Lopatin: If we do this and as the companies progress, each vendor will have. 33 percent of the company. So the deal that we have is in the dust takes one third of the company. And each founder, each company has two different founders, one that's focused on growth and sales user acquisition. And the other founder is focused in product.
Luke Lopatin: So if it's a really tech heavy product, it's going to be more like a CDO ish or it might be someone that's a no code based product person, if it's a simpler solution. So. Each person will have a third of the company. And the nice thing about this is a, the cost of living in Latin America is much lower than in other countries.
Luke Lopatin: I would say right now, depending on the country, but compared to the U S a person can have a very good life for like 700, 800 bucks a month. So it gives each person like a much higher, like the concept of being Profitable. In Latin America, it's different. So I would take with Indy is that we want to be able to enable as many companies as we can and enable as many founders as we can to go ahead and create, you know, and take advantage of this opportunity that they have in front of them.
John Wilson: So first off, I just love this. Like, this is awesome. If I would redesign my career. It would be this.
Luke Lopatin: Well, you're never too late.
John Wilson: I know, like maybe Michael Gurley, I think has a similar model. I don't think it's as far along as what you guys are doing. I think he's at four companies now, but it's a similar thing.
John Wilson: It's like 25 to $30,000 checks, tech enabled companies. So I, I'm really looking forward to diving into this. This is gonna be sweet. Okay, so you're cutting $50,000, and this is from Indie itself. So this is your cash. Do you have outside investors?
Luke Lopatin: So we do not have any outside investors so far. I mean, full transparency, I've had several people come to me and say, Hey, I'll just pull me up all the money or the investment that I need.
Luke Lopatin: But I feel that we're still experimenting. I feel it is really early on yet. So I much rather. Play it safe. And if anyone's going to lose money, I'd rather it be me than anyone else. So the best way to put it is for now, it's just me. If at any point this scales into like a largest number, if we can, you know, at some point do maybe 20, 30 or 50 companies a year, then it will definitely have to change.
John Wilson: Yeah. That leads me into my next question. Just as we're going through this, like you said, 20 to 30 companies a year. It sounds like that's what you think scale is. That sounds like a lot to me. It's like two companies a month.
Luke Lopatin: It's a great question. And I'm not really even thinking about it at this stage.
Luke Lopatin: Right now we are doing about one company every month and a half. That's the average. We're not doing it in batches because we want to be able to actually put our heart and soul into it. We put a lot of time into it. Getting the best ideas into validating that we have a very thorough process that we validate each idea through either by either precharging clients before we build a product or going fairly deep.
Luke Lopatin: So we actually want to make sure we have all four ducks in a row and not be launching multiple companies prematurely. Now, if at the future, I'm saying two, three, four years down the line. There's what, you know, in itself needs to have our product market fit there. You know, like we think it's there, you know, early results are encouraging, but we're going to know a few years down the line.
Luke Lopatin: That's the truth. We have to see if 70 percent of our companies Do well, like our thesis is. So if we see that goes well, you know, a couple years down the line, we'll start analyzing how to scale. I can see the way I'm an introvert at heart. I have high hopes. I have high expectations, both for myself and for our companies.
Luke Lopatin: And I think we can create something amazing. But it's step by step. I'm going to use an analogy here that I feel really embarrassed about using, that I should not, but if you look at, you know, like Y Combinator, you know, like they started with, you know, 10 companies a batch, you know, because it was like, you need to start now, they do 400 companies, but it took approximately 15 years for them to get to this space.
Luke Lopatin: Again, I'm not comparing. I don't think we'll ever get to that stage or to that level. But my point is, progression takes time. And it's also about having fun. So we're not sure until when it will be fun, you know, like right now it's amazing to be fun because my job every day. It's only talking with amazingly smart founders and like, that was by design.
Luke Lopatin: So after I sold my last company, I took a few months off, I went and tried to find my, you know, like my IKEA guy and CNC, like what's in it for me? No, like before it, like I was a race dog, you know, I was just like in the track, just racing. I got to the finish line and I'm like, this is the first time I can actually take a step back.
Luke Lopatin: And be conscious about it and be intentful in the next five, 10 years. And what I realized is I only want to talk with really smart people all the time. And that's, I think if you ask me, the actual best part of what I'm doing right now is I only get to talk with smart people all day long. And that's just amazing.
Luke Lopatin: It doesn't get any better for me, at least for me.
John Wilson: I mean, that sounds pretty great. That sounds
Luke Lopatin: ideal. Well, I'll tell you the non ideal part.
John Wilson: Yeah.
Luke Lopatin: We are all entrepreneurs and we all think. You know, like we could do better or faster and when other people are executing and you're not the one executing on a day to day basis.
Luke Lopatin: Some days you're really pleasantly surprised and other days you're like, if I could just, you know, put my hands on the keyboard and stuff, but it's not, I can't get involved. Then the founders would not appreciate if I get on their turf. So that's kind of the flip side. When you're a race dog, like I am, you just want to get into the race.
John Wilson: Walk me through. I want to dive into this part a little bit deeper. Cause I keep thinking about this as we're talking here. Like what support, what day to day. Or maybe it's not even day to day. Maybe it's week to week, but what are you actually giving to these founders aside from a check?
Luke Lopatin: So first from a check perspective, it is small check.
Luke Lopatin: I know it's small check and I make sure my founders understand that it's a small check. I tell everyone is if you are going to accept this deal for the money. Like this is not the right place to do it. So there's multiple support things that we do from both running our processes. We feel we have a pretty good idea in how to pick the right businesses and how to validate them.
Luke Lopatin: And we think that's a big part of survival. We also have strict processes on how basically which. And how founders should take each other and how to make sure there's going to be, you know, like a long term fit between the founders himself, because that's many times a point of contention down the line.
Luke Lopatin: So we try to take all the different points that might fail in the future, and we want to see if they fail now at the beginning is obviously not going to be perfect, but we try to be as thorough as possible. So I feel that's a big part of the value. Second part of the value is the network that we break.
Luke Lopatin: Either from, you know, access to the right people, to the right tools or to the right conversations. Third thing that we do is we have our own in the build community. So we have all the founders. They know each other. We are all in the same slack all the time. We all help each other and we get it through.
Luke Lopatin: So there's this nice little community that's brewing and it's only going to get better. Then we have a ton of external services that are prevented. In case they need, you know, like additional support. So, you know, like, are we building a brand who's the brand expert that we should bring? So we have pre vetted brand experts.
Luke Lopatin: You want to do legals is the way to do it. So we have that for a lot of different services and basically in the last part, which is. The one, again, I'm the most embarrassed to mention, I should not even mention it, but I think it is the most important is we help people understand where they can go and how far they can go.
Luke Lopatin: For instance, most last time entrepreneurs, they don't think they can tackle the US more market. No, it's just too complicated. It's another language. It's not your main language. They don't get the culture and we show them it's that shenanigans, you know, like the same thing target, like we show them like that they can go.
Luke Lopatin: Like larger and larger. Give me an example on this. Yesterday I was having conversation with the founders of the D2C brand that I mentioned before. We received the product about three weeks ago and we started selling and we're at about like a hundred dollars a day in sales. So like, you know, just started like it's growing, it's growing organically.
Luke Lopatin: And they started asking questions, you know, like asking themselves questions. Okay. Should we start making this a little bit better? This a little better. And my question to them is what can access this don't think incremental. Think 10X, you know, like what will take you from 100 a day to 1, 000 a day? What will make the difference?
Luke Lopatin: And asking those right questions and making sure people, like, break their own proverbial glass ceiling, if you will, I say is the biggest value of all. But it's so subjective, so, like, fluffy what I just said, it's all bullshit, that, you know, like, I'm not sure if it's real or that's just in my head. As much as I can say, though, is we ran.
Luke Lopatin: NPS on all four companies. And so far we're at a tap. So everyone would, you know, like they love it and they will highly recommend can't say it's going to keep for the future, but so far, so good.
John Wilson: Yeah, I would have to imagine the glass ceiling thing. Like you're saying, I don't know if it's real. I don't know how it couldn't be.
John Wilson: I mean, you're coming from markets where, like you said earlier, you can live a good life on seven or 800 a month, and you're coming from markets where you could probably make 10 million in sales. If you sell to the U S I feel like there's a shift there where that's probably an unfathomable amount of money to most Latin American entrepreneurs.
John Wilson: Whereas here, that's like. Oh, you just got started. I don't know. I can totally see how that would be really hard to conceptualize.
Luke Lopatin: So, two things, and just, first is clarification, so I don't get any haters. When I say it's 700, 800 a month, that is definitely a good living for a single person, or a person with no kids, not single, but that lives by themselves.
Luke Lopatin: And they can go out, feed, like, that's not for that. It's probably not enough in a good quality for a full family. But since we work with younger entrepreneurs that they're usually, you know, our average is 25, 26,
John Wilson: it
Luke Lopatin: definitely falls around that age. Onto your second point. You know what? The biggest, I actually don't know where I have this, but it's definitely not mine.
Luke Lopatin: So I don't want to take any credit for this line. I heard somewhere that said a million dollars is a life changing amount of money for anyone. It doesn't matter which country you're in, it's particularly true for Latin America. Once you get to a million dollars net worth, I don't want to say you're set for life, but you can make your life decisions without, you know, you have no debt, you have a million dollars like net worth, like you can buy your house, you can do whatever you want, you can make decisions, you're free.
Luke Lopatin: So my goal with Indy. It's to get as many people as I can above that 1 million a year goal. So I set myself a minimum limit of 20, make it at least 20 million years in five years. So that's kind of like my personal goal, but hopefully it's going to be more, but a million dollars is a life changing amount of money.
Luke Lopatin: And I think that's, that could be true anywhere, probably not to your typical audience of this podcast, but in general, if you look at, you know, middle America, do you mean income or the mean savings? A million dollars is a life changing amount of money.
John Wilson: Yeah, that's a good point. We tried to launch a version of this, but in home services, and we've really struggled with it for probably a number of reasons, but we wanted to do the same thing.
John Wilson: We wanted to incubate entrepreneurs in the home service space. Something we know well, something we feel like we can support and help launch and use our shared services and all that great stuff. You know, help propel new entrepreneurs into the space. It was with the same basic thesis of like, how do we help others sort of create wealth and selfishly, how do we get into new markets?
John Wilson: Just cause I think that would be interesting, but we really struggled on the candidate, uh, Sourcing side, maybe it's the typical person that follows me because they were usually sourced off my Twitter, off our podcast or something like that, usually married finance background and could possibly go get a very high earning W two position versus like, what are you supposed to look for?
John Wilson: It's the poor, smart and desperately wants to be rich
Luke Lopatin: and chip on their shoulder and chip on
John Wilson: your shoulder. Yeah. So, yeah, we've really struggled with candidate sourcing. How have you guys gone about candidate sourcing?
Luke Lopatin: So I'm going to break the format a little bit because I know you typically ask this at the end, but that is the number one challenge for Indy,
John Wilson: you
Luke Lopatin: know, finding the right talent is so at this stage, we receive probably over a hundred applications of founders a month.
Luke Lopatin: And we typically engage with one, maybe two of those founders to move forward. And that is the most complex because we look for a lot of things in this founders. I know we are being kind of picky and it's not a part of the job that I love because it's, you know, saying a lot of no's and that just does not feel correct, but it's part of the process.
Luke Lopatin: The main sourcing is same thing as here. I'm very active on Twitter. Recently started on LinkedIn as well a couple weeks ago, and I've had my Twitter account for probably 13, 14 years at this stage, but I barely used it. So I went from 1000 followers to over 10k in a few months just by creating good content in Spanish because not that many people talk about.
Luke Lopatin: This stuff in Spanish, so there's actually not that much competition. Another part that I find fascinating about this is that people think that you know what you're talking about just because you're generating and that's something like, maybe that I don't feel I'm smart enough myself, but putting yourself out there and just creating all this content creates a perception on who you are and how smart you are that I'm not sure in my case, it's, it's very real.
Luke Lopatin: Yeah.
John Wilson: One, I think you are smart. Two, I totally agree. And one of the funniest examples of this, I think, is the podcast. For me. Because, like, let's play this out really quick. Like, I have really smart people onto my show, and we talk about how smart they are, but somehow, to the listener, That means that I am like smart by association.
John Wilson: So I get like way more credit than I'm due because I happen to talk to people who are smart. And I think it's just totally comical. Like guys, I'm not that great.
Luke Lopatin: Well, I think you're great. I've listened to the podcast. I think it's amazing and it takes a lot of work. I think the most under appreciated Tell up smarters in general and up a great intrapreneur even more is consistency.
Luke Lopatin: John, you are very consistent, you know, you just output you create. It's hard. I mean, I started doing this myself a few months ago. It's tremendously hard. Some people might be natural at it. I'm definitely not natural. I'm working on it. I have to put in the calendar because otherwise I'm not going to tweet.
Luke Lopatin: I'm not going to do it naturally, but the consistency picks up.
John Wilson: Yeah. Yeah. So you started creating a bunch of content in Spanish. You source your candidates. Who comes up with the idea?
Luke Lopatin: So in general, we really don't care about where the idea comes from. So to start with, the question is out of the six ideas right now, five came from us.
Luke Lopatin: One came from a candidate. We really don't care where the ideas come from. I have basically do ideation sessions. My wife makes fun of me just because I simply use the word ideation. She thinks it's a great verse that it's made up. It's
John Wilson: a great word.
Luke Lopatin: It might actually be made up. And she says like, what do you actually do?
Luke Lopatin: You just sit down and think I'm like. I actually do that. So I feel like a dumbass just by doing that itself. But I sit down a couple of times a week and just try to think about the problems that rise. I actually wrote a article, it's in Spanish, about all the frameworks that I use for ADS. And since you live around new technologies, you know, like what do the changes in the world happen?
Luke Lopatin: You know, like when GPT 3 came out, I went on a ramp and I decided to see all the industries I could apply to. I literally wrote out a hundred industries, trying to understand how that could change. And that's how we got to the recruiters one. One I was more familiar with because I had a ton of recruiters in my tech consultancy business, the one that got acquired last year.
Luke Lopatin: So I knew that feels a little bit better than the rest.
John Wilson: So I kind of like that. Well, one, I just like it a lot, cause that sounds like fun, but it makes the process of. Incubating the entrepreneur a little bit easier where they don't have to do like, you don't have to look for someone with like the rocket ship idea or the anti unicorn.
John Wilson: You're really just sort of vetting the individual. Are they capable, smart, willing to do it? Yeah.
Luke Lopatin: Yeah, exactly. Which again, it's the worst part. I'm judging someone else. Like I'm not qualified to judge someone. So that's kind of like the worst person.
John Wilson: Yeah, I always thought when we started our program, I didn't think that would be the hard part at all.
John Wilson: I thought that'd be the easy part. Really, you're offering someone an opportunity, you're offering them backing, you're offering them support. I thought the hardest part was going to be like the zero to one or, you know, launch the first six months, something like that. How do we get fit inside each of these new markets?
John Wilson: I had no concept that the hardest part was actually going to be discerning whether or not 500 people are capable of doing that. Of like the mental anguish of starting a home service company. I had no idea. I'm like, I've hired hundreds of people in my life. I'm sure I can do this. And I was totally wrong.
John Wilson: I got my butt kicked.
Luke Lopatin: A hundred percent. Plus it comes down to, you know, like you're just having zoom conversations or maybe if you're lucky, you'll meet them for a coffee or lunch. And you wouldn't like you said, you know, like you want people that have something to prove. People that are hungry and people that in general like want to progress.
Luke Lopatin: Now here's the interesting part, you know, like is that really quiet guy, you know, that who's been a developer, he's a senior developer and he's a big introvert and he won't talk to you much. Is he going to be planning through day to day? Like, it's really hard to understand if that person has the cred, that person in general just does not talk much.
Luke Lopatin: So, this is how we solve for it. And this is kind of like, one of the best parts is. What I do with all the founders is I tell them, listen, we're going to date. And we're going to date through the idea phase. And through the validation thing. Once we've validated the idea, we are going to get married.
Luke Lopatin: Married means we're going to sign the contracts, we're going to put paperwork in place, and we're calling, like, we're making mental decisions. That we are going to be doing this together for a long time, but the idea phase and the validation phase, you should take this about depending between a month and a half to three months.
Luke Lopatin: And we used to three months, I tell you, you're dating me right now, like it or not, like you should be judging me, make sure that I'm adding value to what we're doing, make sure that it makes sense for you. You know, and I do the same thing. I make sure that like who's on the other side, you know, they're bringing to the table what they should be bringing.
Luke Lopatin: So I get to see them in action. So we get to work together. And sometimes, you know, like on paper, on this first Zoom call, first couple of Zoom calls, I'm like, this person is amazing. Then they were simple talkers, you know, like they were not doers and like, I like doers. I don't like people who talk, you know, in general, you know, like if you have a perfect conversation with someone, it's when you should be worried.
Luke Lopatin: Like, Hey, like, why did this conversation go so well? And make heads because those who just know how to talk really well, but they don't necessarily come through. So I use that daily period just to make sure that they like me. I want to make sure that I like them. I want to make sure that they like each other.
Luke Lopatin: And that they're both bringing on, you know, their equal weight.
John Wilson: So, you've sort of mentioned this a few times, I just want to make sure that I'm clear on it. Are you bringing on two founders?
Luke Lopatin: So, each company has two founders. One is a founder that is focused on growth. So basically this person is the person that's going to be bringing on the sales.
Luke Lopatin: Doesn't matter if it's going to be through digital marketing, cold outreach, or whatever process, which is called this, this, the growth co founder. So this is the growth co founder that is going to be people putting potential clients through, you know, like your funnel. And making sure that they come out the other side.
Luke Lopatin: The other co founder is what we call the product co founder. So the product co founder is the person that's going to be in charge of understanding the real problematic behind this audience, making sure that we design a product that solves for that. And if it's a tech heavy solution, actually someone who codes it.
Luke Lopatin: So it's a CTO sort of person or like just call it senior developer, just to make sure, like it doesn't matter, like their level of seniority, meanwhile, they can get at least the MVP or B1 ready. So it's always two co founders. We don't do any solo co founders and we don't do more than two because if we do more than two, we will each get less equity, but I don't care about myself or Indie, I care about that.
Luke Lopatin: I want them to have substantial equity. So 33 percent of company is. Substantial equity in general, if you bring another person in and they're like, you know, like you're 25 percent or a little bit less, it becomes less plus we are in a way that they're co founder as well. So, you know, if we need to untie or have conversations, that's what we're there for.
Luke Lopatin: So it's always do.
John Wilson: That makes sense. Okay. And do they usually know each other or, cause you mentioned them dating each other. They're still like. So these guys don't know each other or people don't know each other.
Luke Lopatin: So we have both cases. So we have cases, you know, like one of them is a couple. So it's a young couple actually are 22 years old and they've been dating for several years and then they're amazing and they know their influencer marketing upside down.
Luke Lopatin: Like they know how that world works and they came together, you know, as a pair. Another of the companies is a former employee of mine. That I know it's amazing. We've worked together for many years and I just told him, Hey, find someone you really respect and he bought on like this amazing co founder that knew from, from other companies, like recruiter AI, we actually introduced them so, and they've met through us and they're getting along amazingly well.
Luke Lopatin: So we have all different cases and it doesn't really make a difference. What we make sure is they go, they go through our co founder validation phase. Which is just sitting down and we have a list of questions they go through. We actually ripped this from first round, the venture capital firm. They have a document called 51st questions, which is amazing.
Luke Lopatin: And it's the 50 questions that the potential co founders should ask each other and ask stuff like, Hey, how much time are you, are you going to work on this? You know, like, are we going to be working as equal? Do you want to get paid the same amount? I need to get paid. How big do you want to go? So basically, like they have to go through all these questions, making sure that they're aligned, even if they don't agree on the answer, they're aligned on the process on how and when to make those decisions.
John Wilson: That is really interesting. So, I'm trying to think of the other people. So, Michael Girdley, Stephen Ullman, I think those are the only two that I can think of, that successfully incubate ideas. I don't know that any of them do the co founder thing. That is really interesting. I like the idea, though. Makes sense to me.
Luke Lopatin: Well, I think, you know, like, there's stats. You know, usually when the top five richest white companies fail, That It's the co founders, you know, like we are in the business of minimizing that something can go wrong. That's all what we're doing at the day. We are minimizing the, you know, like the co founders not working.
Luke Lopatin: We are minimizing, you're not like the company, not being able to find clients. So basically we like pre bet how we're going to get clients. Even before we build. The product. We want to understand what our distribution channel will be, and we test it out and we make sure it actually works. And we look for those first 10 sales even before getting the product built.
Luke Lopatin: Recruiter AI, for instance, we had, you know, like a form. We didn't want to pre sell because we didn't ensure it was technically capable of the solution that we wanted to build. So we're evaluating the problem. At the same time, we're evaluating the technology and we have the form. That like basically filled up with your credit card.
Luke Lopatin: And once you click like submit, you don't like just pay for it. We put it like, Hey, we did not process your credit card. Don't worry. Nothing has been charged or something like that. We're validating that people want to put their credit card down for this. And we're validating, we're validating as well. We don't like how we got those people.
Luke Lopatin: So we are in the business. Of minimizing the chances of something going wrong, not of maximizing the end result because we're not looking to create a unicorn here. We're just trying to get to a potential sale of, you know, 10, 30, 50, 100 million with as much chances as we can.
John Wilson: I want to grab onto that last line and sort of like, what does success look like here?
John Wilson: So it sounds like success looks like a sale. This is not a forever hold portfolio.
Luke Lopatin: It's a great question. I'm going to bring in my personal manifest behind this. So I actually, I feel ridiculous. I wrote a manifest before starting this, you know, part of my final week, you guys, it's actually on the IndieBuild website.
Luke Lopatin: So I've read it.
John Wilson: Yeah, it's on the website. It was cool.
Luke Lopatin: So apologies to everyone. The website, it's in Spanish. I'll probably translate it in English at some point, but it's geared towards Like the founders, which like some of them might not speak English. So apologies in advance. So for me, you know, like it's all about personal choice.
Luke Lopatin: It's not about one specific roadmap. So for some, you know, founders, it might be, you know, like they get an offer for 3 million. And if they can get to that 1 million, like they're going to be super happy and I'm going to be happy for them. And if that's what they're going to do, it's fine. Like they had a decision to be able to make, they can make the decision because it's life changing for them.
Luke Lopatin: Other vendors might get 10 million or like, let's just say an AR, like 2 million. They say, Hey, we're too, why not go for five? And it might be when they get to 5 million AR, they say, let's go for 10. And then they might say, Hey, let's buy a complimentary company and make. So it's all about personal choice.
Luke Lopatin: That's my personal perspective. So some of them actually want to keep a lifestyle business. You know, they have right before this call, I was having a call with a guy from Argentina. This guy from Argentina about four or five years ago created an app. He's doing about 1. 5 million in AR. So about 1. 5 million in revenue a year.
Luke Lopatin: He has zero employees. He does it all himself. He is very stressed though. So he's like, we had a conversation now for him to be part of Indy, but you know, like he's contemplating, should I sell? Should I grow? Like, you know, like what are my options? I love having those conversations because I went through that process when we decided to sell our company as well.
Luke Lopatin: And we think it's all about choice at the end of the day. It's about personal choice. So each founder will be different and we'll be happy to go in that journey that works out best for them. So if they want to take a profit, the way we set up our contracts is they can pay themselves up to, I can't remember the exact number, but I think it's about 10, 000 a month in salary each.
Luke Lopatin: Anything above that, they need to take out as dividends. So we participate in the profit sharing in case they want to do, you know, just profit sharing at the end of the day. So for us, it doesn't really make a difference. It's all about personal choice and it's the founder's choice.
John Wilson: Yeah. Can you explain valuations of these companies to me?
Luke Lopatin: Absolutely. So just to be clear, the valuation that's going to come or how we got to the deal that we offer them.
John Wilson: If they sell like a million ARR, how is that valued?
Luke Lopatin: I'm going to go with the big, it depends, right? It depends, you know, like they get to 1 million AR in 5 years or they take them 12 months to get.
Luke Lopatin: So that's, you know, like a huge difference in valuation itself. Are they solving a newish problem that's super hot right now? Or are they solving something that's, so it really depends. EntryGist actually came up with a really interesting study through MicroAcquire. Um, SAS valuations and they have a calculator there.
Luke Lopatin: So in general, I would say if I have to give really rough numbers, if it's a cool ish one, it will probably go between five to 15 times. Revenue, if it's in the uncooled side, it's going to go from two to five times revenue. So that's kind of an interesting, sometimes the multiplier is huge when the revenue is minimal, or if there's no revenue because you're just betting on the future.
Luke Lopatin: So there's no right number isn't always in this sort of businesses. It's worth what someone's willing to pay for. There's no market number for it. There is once you go public, you know, like you have just some public valuations, you can look at Salesforce valuation, you know, like, and so forth, but no comparison.
Luke Lopatin: The best you have right now is there's some calculators like micro requires that you could use. But there's no rule of thumb. I personally invested in a lot of this private equity deals and you have all sort of ridiculous stuff. Sometimes it goes even for one X revenue and sometimes it goes for eight times.
Luke Lopatin: So there's a lot of things that it depends comes into play.
John Wilson: Yeah, I'm going to ask what sounds like a dumb question
Luke Lopatin: know them.
John Wilson: So like
Luke Lopatin: bear with me. No, no, I'm taking those notes I'm sorry. That sounds so aggressive. I mean, there's no such thing as dumb question. There's only a dumb answer.
John Wilson: Yeah, okay So a million dollars.
John Wilson: I have never started a SAS company. Okay, so like let's get that out of the way I don't own one A million dollars to me does not sound like a lot of money in sales. Again, I don't know anything about SaaS. All I'm thinking about is like, our own companies, and a million dollars in sales, and like, sort of how easy it is to do a million.
John Wilson: I've always been amazed by SAS valuations because a million dollars does not sound like a lot of money. So I'm like, how can it sell for multiples of revenue when it's such a small company? So is a million dollars a lot of money in a SAS company?
Luke Lopatin: So here's the interesting part. I'll answer this from two different perspectives.
Luke Lopatin: The first is. It's really freaking hard getting a SaaS company, 80, 000 in revenue a month, which is what, you know, like 1 million ARR. It's hard. Second part, which is the most important one and why they get these valuations. In my mind, it's not because of the recurring piece. That's not the real reason why they get even though it is really important because you can you also have like a lot of different formulas that come into play that you can actually have like no net positive on another portion stuff that only exists in the SAS world, but the really important thing is.
Luke Lopatin: It's much easier scaling a SaaS company. Once you have hit 1, 000, 000 in AR, you know, you can get to 5, 000, 000. And once you get to 5, 000, 000, you can know you can get to 10, 20, 30 million. It's much easier scaling a SaaS company from 1, 000, 000 to 5, 000, 000. Then scaling a services business, you know, like the scaling part is not depending as much on the humans.
Luke Lopatin: It's
John Wilson: Yeah.
Luke Lopatin: So when they buy you for those multiplier is when they do, you know, like the discounted cashflow analysis on it, they know how fast it can grow once you're rich product market fit. And once you have hit 1 million in AR, that means you have rich product market fit. And that's why those valuations come into play.
John Wilson: Okay. That makes a lot of sense. Okay. So the zero to one is just astonishingly hard. Whereas in a service business, I don't know that the zero to one, like if you go start a cleaning business or a plumbing company, like you can get to a million dollars in a couple of years if you wanted to, and I wouldn't say it's astonishingly hard.
John Wilson: So finding your product market fit in SAS, that's the journey. And that's what makes it valuable is that you found the product market fit. Just
Luke Lopatin: to be clear, scaling it past that it's really freaking hard as well. It's not easy. It just means that it's doable. That, you know, your product market, it's real.
Luke Lopatin: And then your revenue, basically you have your cogs, they go down, the bigger you scale, whereas in services business, it's always going to be a linear, right? Like to scale your revenue, you're going to need to infinitely scale. The amount of people that you have working in a tech company, the sales company.
Luke Lopatin: It doesn't work that way. There's a tipping point, a tipping scale, where you reach economies of scale and you don't need that many people. So you can have, you know, like a company doing a lot of revenue. With, you know, not that many people and have it be fantastically profitable. Having said this, John, it's not always that the grass is greener of sorts.
Luke Lopatin: It's like, I'm trying to convince a friend of mine, you know, to actually start a services business with me. Like I want what you have, it's not that I don't, like I do, I, I believe in diversification. We call this business model envy. And it's real. So it's, I'm just, the only reason I'm saying this is because I see how things can be seen from this end, but from my portion is like, I want, you know, like my services business.
Luke Lopatin: Like it's scaled to be really profitable. I would say really fast. It took me many years, but it was in a consistent, predictable manner. And like, if I kept it, it would have been consistently profitable for many years as well. And there's something to that, you know, like I would love to have one of those as well.
John Wilson: Is the productized service, do we count like the accounting company? Do we count that as a SaaS or do we count that as a service?
Luke Lopatin: So verdict is still out there on how it gets valued. So there has not been that many sales on this sort of company so far, because it's a, let's just call it a fairly. Like newish model, I mean, it's a new spin on an old model, but marketing is everything as we know, you know, like just the optics that you put in something is what matters and the optics on it.
Luke Lopatin: So the valuations that I've seen so far fall somewhere in the middle. They're higher than a services business, but they're lower than a sales. And the reason I'm doing those is that it's diversification. And that feels
John Wilson: achievable.
Luke Lopatin: It is.
John Wilson: Yeah. Yeah. The productized service thing feels like an achievable, like I feel like I could, we've talked about various productized services that we could launch just from our like, Hey, here's a problem we have.
John Wilson: We know that people have it, but it takes some amount of labor. To accomplish it, whereas, you know, we don't know anything about coding. Would you say that the productized service is like, in general, easier than a SaaS? I'm not saying any of them are easy.
Luke Lopatin: You read my mind. Being an entrepreneur is just hard.
Luke Lopatin: You know, it's just banging yourself against, you know, like a rock and hard play. It's all day long. So it's never easy. I think the challenges are different. And there's other aspects to it. You know, like the parts that are difficult are just a little bit different. You know, like when you're doing a product type service, it's all about the SOPs, right?
Luke Lopatin: You know, like your standard operating procedures. It's all about that. That's the only way you can, you can scale fast. Whereas in a SaaS will probably be about, you know, like first finding your customers. In second, about tweaking the product literally on a daily basis to make it, you know, like, you know, like 1 percent better, like, it's all about that.
Luke Lopatin: It's like when you're working in SaaS, it's literally changing one thing, seeing how the analytics change, changing one other thing and seeing how many can change as fast as you can. Meanwhile, you keep track on what's happening and what's going well. And that's a little bit, you know, frustrating as well, because you might try, you know, like, let me give you this example.
Luke Lopatin: We launched an MVP of one of four SaaS companies two months ago, and we had, you know, about, we're able to get about 10 to 20 signups a week, but none of them stuck, you know, like these for maybe like a few hours and that's it. We're like, we know the problems there. Like we've got a little bit of the problem before watching this.
Luke Lopatin: It's like, and we started tweaking, you know, like just a little bit. It's weak. No, that's just making it like better, better, better. And then two weeks ago, we had the first aha person. The first person who actually like, we changed it enough and made it is now. And that person who was the first person to try that variation of what we did has been using it absolutely every day for about three hours a day, every day of the week.
Luke Lopatin: And then more people piled on doing that the two previous months just tweaking and tweaking tweaking is frustrating as hell because you don't know it's not like there's a road map saying, Hey, this is what you should be doing. It's like you try to make decisions according to the analytics and what you're seeing is from the usage, but you're just like, you know, making like bifold decisions.
Luke Lopatin: So the answer is difficult. It's just different. It all depends on what your skill set is, right? John, you know how to hire people, you know how to scale, you know how to create SOPs, and all that. So productized service is probably going to be easier from your skill set.
John Wilson: This is fascinating. I blanked on my next question.
John Wilson: Cause I'm just like, my mind's running. My mind is just running. I'm like, I'm going to go do this. I'm going to go launch like a star. I have no idea what I'm doing, but let's do this. I'll provide no value to anyone.
Luke Lopatin: I was talking with a candidate today with one of the gals that's in the process. And she asked me a question and like, listen, I'm going to give you an answer, but just understand that answer is made up.
Luke Lopatin: I don't have the answer and I'm not sure if anyone has the answer and don't trust me for it. Just like find your own answer. That's what we're going to like. We're going to go in this, you know, no period where we're going to get to know each other and see if that answer plays out or not. So I don't know what I'm doing either.
John Wilson: Yeah. No, it sounds like you're having fun though.
Luke Lopatin: That's what I care about. Like the promise to myself. Was like, I'm going to have fun.
John Wilson: Yeah. I want to talk for just a few minutes about, I haven't had a lot of people on the show that have sold their company. So I just want to talk for a few minutes about just really not even the process.
John Wilson: Of the sale, but more like, what did that process of finding yourself look like? Sounds like you spent a few months, you re centered and then you started, instead of starting one company, you're trying to start like a hundred, right?
Luke Lopatin: It's one company that creates more companies and I don't do the heavy lifting.
Luke Lopatin: The founders do the heavy lifting.
John Wilson: Yeah. Walk me through just that post close mentality.
Luke Lopatin: Yeah. So first is the whole process from deciding to sell the company to the To selling it, we use M& A advisors for the process. So it was first about four months of, you know, like creating documents and they reached out to a lot of potential buyers and they came back with about with four LOIs and then we negotiating them and we picked one.
Luke Lopatin: Which so far has been a fantastic choice. And then it was four months of due diligence and doing all the contracts and the SBA with the, basically the sale purchase agreement and all that. The last two weeks were particularly. So the last two weeks were just full with anxiety with some of those like line in the sand moments where like each different party had to understand.
Luke Lopatin: Okay, this is where they actually stand. Like, am I crossing this time because they're not gonna cross it and vice versa versus the night before closing. We had to draw a line in Santa. It was a major one. It was based on the tax accounting thing, but it was a major decision. And we said, this is our line.
Luke Lopatin: And they're like, we can't do it. And then we're like, we're sorry, like we can't move forward. And then they messaged me at three o'clock in the morning saying, Hey, Lucas, it's on, like, I got this approach internally. So what I'm trying to get at is by the time we actually closed and the money hit the bank and all those good things, it was stressful, it was really.
Luke Lopatin: Luckily, I have an amazing partner and the kids would know the kids don't let you like be stressed because you know, like you just have to be there with them and like, that's the amazing thing about having the kids is they recenter you all the time. So it took a few days just to relax. And then, you know, like, I'm like, I like.
Luke Lopatin: Need to do something like we travel, like we typically do. And then I'm like, I can't sit down. So actually it's interesting because the first thing that I thought that it was going to do, it's like, I need to go build a unicorn or a decade court. Like I had a medium success. Now I need to go for the big leagues.
Luke Lopatin: And I took about a month trying to find like a really good idea that could get them all. You know, like I'm friends with VCs. I'm not against them. I just. Serve their purpose. I just don't think that route's for everyone and all sort of time. So I'm like, I found an idea that I thought was amazing that I knew, you know, big venture firms will back me behind it.
Luke Lopatin: And I, I knew that I could. And going back to my wife when I told her like, Hey, this is kind of it. I think she said. Really? Like that? Are you sure you want to do that? And I'm like, okay, let me wait a second. So I went back to, like, for a second said that I'm like, I don't even want people telling me what I need to do or how fast I should grow.
Luke Lopatin: I think it's all about personal choice. That's always been my mantra. Why should that change that? So I hadn't tried to find a key. It took me about two more months to actually go through that and to be clear, I wasn't fully not working because I have, like, I always had, you know, like a few business in the background running, you know, like just side hustles that like are not necessarily small, but they don't take up much of my time and I came up with what it's indeed by finding the first is first I started with the get back.
Luke Lopatin: And, you know, like, like know what I think, how it should be back to the world. And I realized I really care about entrepreneurship in Latin America. Like I was really lucky. My parents, you know, like they paid for an amazing education for me. Like I'm one of the lucky ones, but I know many people are not that lucky.
Luke Lopatin: So I want to try to bring as much of that knowledge in Spanish as I can. Second is I want to have the potential success. Making, you know, like doing a unicorn, but without the risk. And I ran the numbers behind doing a startup studio for the anti unicorns. And it plays out fairly similarly, like, you know, like the numbers check out, like if it goes well and I do enough companies with enough time, you know, like the numbers are going to be.
Luke Lopatin: Big, you know, like by any standards. So from that perspective made sense. And the third is I decided I only want to talk with smart people. And once you have a company that's big enough, you need to hire those B players and those C players. And sometimes the D players like you need that, right? Like it's a matter of any sort of company.
Luke Lopatin: And I realized the only way I could do it is if I'm actually not running the company. So that was another supporting part of actually doing the startup studio. And then. Basically what I'm good at is I can join. So basically I come from a tech background, but it also done a lot of marketing in each requisition.
Luke Lopatin: I've spent millions and millions of dollars in ads in the past. So I get the mix between tech marketing and business. Like I can mix those three, so I'm like, I can potentially help other people do it. So I just went on the IKIGUY point by point trying to make it and it finally closed. I'm not promising this is going to be my IKIGUY forever because I think it's personal choice.
Luke Lopatin: It's about understanding that things change at the same time. And I understand this will probably change for me, but I'm committed to this for the many years to come.
John Wilson: Yeah. I am glad, I mean, you know, from a total outside perspective, who has only known you for like 45 minutes, I think you chose the right choice.
John Wilson: I was always surprised when I saw people And I know I have this same temptation, right? If I sold today, what would I do tomorrow? And the gut response is I would go do it again, but bigger. And I think that one of the consistent struggles that I've had in my life is as we've become more and more successful and the company's become Larger and larger and more successful is the constant moving goalpost and not just like taking a second and being like, Hey, maybe that was okay.
John Wilson: Maybe that chapter was great. And maybe I don't need to do what I originally thought I should do or want to do. Maybe I did it and maybe this time can look different. I thought that was brave that you did that because I think that it's the easy choice to go the other way.
Luke Lopatin: Have you thought about something?
John Wilson: Yeah. It's always a thought private equity is extremely active in our space. And. The space is just hot in general. So our space gets hot every 15 to 20 years. So if I don't do it now, which I've already opted not to, that was a whole like mental process I went through last year, then I have to know that, Hey, this industry is not going to be hot for another decade.
John Wilson: Maybe two. And that's okay.
Luke Lopatin: You know what I really like about what you just said? Is you made an intentional decision. And for me, it's all about being intentional. Like, not about, you know, like just growing for the sake of growing. It's like actually making the decision. That you want to grow that you want to do this for the next 10 years like I think intentional is if you ask me the one word that has marked me for last year, and it's kind of like my current is being intentional.
Luke Lopatin: I want to be intentional about everything that happens in my life who I spend time with. Which places we spend time in, am I the dumbest or the smartest person in the room, which books I'm reading? I'm a big fan of, I'm in the old entrepreneurs organization member. I love it. I love my forum and just about being intentional, but I want to choose that form every year.
Luke Lopatin: So for me, it's about being intentional about life, which is just great about what you said, this, you know, like you were intentional about doing for the next 10 years.
John Wilson: Yeah, and I agree, and it's hard. It's harder than the other one, which is just continuing on, because I think it's, I don't know, I know a few people who've had very large paydays in the exit from their company, and I don't know, it just never seemed like they took enough stock of their life and basically decided on the next decade before Like hitting their head against the wall again.
John Wilson: So yeah, I receive it. I'm glad for you that you did it
Luke Lopatin: What did you said reminds me of that? Vonnegut carbon a good story, you know, like where you know Like they go to the billionaire's house and they said I'll have something that he'll never have which is enough you know, like I think understanding what you're not is and being intentional about it and Makes you a happier person all it all.
John Wilson: Yeah, I agree. I don't know that I have that part figured out, but I do know that what I want to do, which is
Luke Lopatin: not little, it's more than what people decide. So that's a lot in itself.
John Wilson: Yeah, this was awesome. I appreciate you coming on the show today. The conversation was great. I enjoyed getting to know a lot more about indie build.
John Wilson: If people want to get ahold of you, where are they able to find you?
Luke Lopatin: So I'm active in Twitter. So it's Twitter on my handle is L Lopatin. So my first name and then my full last name or Indy dot build. And my notes there it's Lucas at Indy dot build as well. So email me if you'd like to check.
John Wilson: Awesome. All right, Lucas, thank you so much for coming on.
John Wilson: This was awesome.
Luke Lopatin: Thanks for having me. It was a lot of fun. Thanks, John.
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